Financial Reporting

Delta Shares Fall After Lower Guidance

Other airlines also saw their shares decline amid fears of a global slowdown.
William SprouseJanuary 3, 2019
Delta Shares Fall After Lower Guidance

Shares of Delta Air Lines were down as much as 10% after the company said its unit revenues grew at a slower-than-expected pace in the last three months of 2018. Delta issued fourth-quarter profit guidance of $1.25 to $1.30 per share — at the high end of its earlier range.

Unit revenues likely grew at 3% in the last quarter. An earlier forecast put the growth rate at 3.5%.

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“The unit revenue guide-down is the second time Delta lowered [its] RASM [Revenue Per Available Seat Mile] forecast in the past two months,” Helane Becker, an analyst at Cowen & Co., said in a note. “Investors are concerned that RASM will continue to weaken in 2019, although we believe other airlines are not necessarily seeing the same pressure as Delta.”

Delta said demand for business and leisure travel is healthy but “the pace of improvement in late December was more modest than anticipated.” The airline expects revenue to increase between 4% and 6% in 2019, versus an average increase of 5.6% forecast by Refinitiv.

The company is expected to report fourth-quarter earnings and full-year earnings in the middle of this month.

Shares of U.S. airlines tumbled after the Delta forecast. American Airlines fell 10% and United Airlines fell more than 5%. Southwest Airlines dipped more than 4%. The NYSE Arca Airline index, which tracks 15 carriers, was down close to 5%.

Broader financial markets were also down—though by less than airline stocks—after Apple warned that its fiscal first-quarter sales would be lower than its previous guidance. That announcement sent Apple shares plummeting more than 9% and stoked fears of a China slowdown.

“This piles on to existing anxiety of a slowdown in global growth,” said Jeff Kilburg, CEO of KKM Financial. “Apple can be used as a proxy to China’s growth.”

Photo: Getty Images